Of the eight USMCA components included in the economy-wide model, provisions that reduce policy uncertainty about international data flows, cross-border services, and investment, as well as certain automotive rules of origin, have the most significant impact on the estimated results. The individual effects of these provisions are estimated to be stronger than those of the other components, although the impacts differ depending on the provision. The international data transfer provisions impact all industries in the economy because of the ubiquitous nature of data flows in the modern economy, which amplifies their effect in the model. The automotive rules of origin in USMCA represent a substantial revision of the automotive rules of origin in NAFTA.

...

the USMCA provisions that reduce policy uncertainty for international data transfer, cross-border services, and investment are estimated to more than offset many of the negative economy-wide effects of USMCA’s changes in the automotive rules of origin.

So the USMCA gains are mostly about reducing "policy uncertainty" related to "international data flows, cross-border services, and investment." Here's more from p. 346:

In this report, the estimated effects of most data transfer provisions, cross-border services provisions, and many investment provisions reflect the assessment that the provisions would deter future trade barriers and reduce uncertainty. In each case, the econometric estimates measured the costs of the barriers that the commitments prohibit. Following the empirical evidence from the literature, these estimates were reweighted to reflect reductions in policy uncertainty. The literature suggests the estimates should be about 50 percent of the impact of the policies they prevent.843 For example, if a data localization measure was estimated to reduce trade as much as a 10 percent tariff, the commitment to not introducing such a measure—and thereby removing uncertainty over free data mobility—would have an impact equal to the removal of a 5 percent tariff.

The economy-wide model described in chapter 2 of this report uses a more conservative value of 25 percent of the full impact. This lower value was chosen because none of the literature is specific to USMCA or to many of the provisions within it that are being modeled in this report. This case is often referred to as the “moderate impact of uncertainty” case throughout this report. Using a smaller value reduces the likelihood of overestimating the impact of many of the USMCA provisions that were modeled. However, two other values were considered in alternative simulations. First, a higher-impact value of 50 percent was considered, which reflects the value identified in the economic literature described above. This case is often referred to as the “high impact of uncertainty” case in this report. Second, a lower bound estimate of zero (0) percent, reflecting no impact from reducing uncertainty, was considered. The results of the economy-wide analysis under these alternative weights are also presented in chapter 2 and appendix E of this report.

Let me focus here on data localization. The report says: "if a data localization measure was estimated to reduce trade as much as a 10 percent tariff, the commitment to not introducing such a measure—and thereby removing uncertainty over free data mobility—would have an impact equal to the removal of a 5 percent tariff."

Here are three questions that I think need to be asked:

-- Were any of the USMCA governments considering introducing data localization measures?

-- How was the trade effect of such measures calculated?

-- Would the USMCA rules prevent the introduction of these measures?

What I recall from trying to decipher estimates of gains from eliminating or reducing "regulatory trade barriers" is that there was a lot of estimating and assuming going on. I'm very curious how closely the model here correlates to the reality of the measures of concern and the rules that are supposed to deal with them.

Comments

Of the eight USMCA components included in the economy-wide model, provisions that reduce policy uncertainty about international data flows, cross-border services, and investment, as well as certain automotive rules of origin, have the most significant impact on the estimated results. The individual effects of these provisions are estimated to be stronger than those of the other components, although the impacts differ depending on the provision. The international data transfer provisions impact all industries in the economy because of the ubiquitous nature of data flows in the modern economy, which amplifies their effect in the model. The automotive rules of origin in USMCA represent a substantial revision of the automotive rules of origin in NAFTA.

...

the USMCA provisions that reduce policy uncertainty for international data transfer, cross-border services, and investment are estimated to more than offset many of the negative economy-wide effects of USMCA’s changes in the automotive rules of origin.

So the USMCA gains are mostly about reducing "policy uncertainty" related to "international data flows, cross-border services, and investment." Here's more from p. 346:

In this report, the estimated effects of most data transfer provisions, cross-border services provisions, and many investment provisions reflect the assessment that the provisions would deter future trade barriers and reduce uncertainty. In each case, the econometric estimates measured the costs of the barriers that the commitments prohibit. Following the empirical evidence from the literature, these estimates were reweighted to reflect reductions in policy uncertainty. The literature suggests the estimates should be about 50 percent of the impact of the policies they prevent.843 For example, if a data localization measure was estimated to reduce trade as much as a 10 percent tariff, the commitment to not introducing such a measure—and thereby removing uncertainty over free data mobility—would have an impact equal to the removal of a 5 percent tariff.

The economy-wide model described in chapter 2 of this report uses a more conservative value of 25 percent of the full impact. This lower value was chosen because none of the literature is specific to USMCA or to many of the provisions within it that are being modeled in this report. This case is often referred to as the “moderate impact of uncertainty” case throughout this report. Using a smaller value reduces the likelihood of overestimating the impact of many of the USMCA provisions that were modeled. However, two other values were considered in alternative simulations. First, a higher-impact value of 50 percent was considered, which reflects the value identified in the economic literature described above. This case is often referred to as the “high impact of uncertainty” case in this report. Second, a lower bound estimate of zero (0) percent, reflecting no impact from reducing uncertainty, was considered. The results of the economy-wide analysis under these alternative weights are also presented in chapter 2 and appendix E of this report.

Let me focus here on data localization. The report says: "if a data localization measure was estimated to reduce trade as much as a 10 percent tariff, the commitment to not introducing such a measure—and thereby removing uncertainty over free data mobility—would have an impact equal to the removal of a 5 percent tariff."

Here are three questions that I think need to be asked:

-- Were any of the USMCA governments considering introducing data localization measures?

-- How was the trade effect of such measures calculated?

-- Would the USMCA rules prevent the introduction of these measures?

What I recall from trying to decipher estimates of gains from eliminating or reducing "regulatory trade barriers" is that there was a lot of estimating and assuming going on. I'm very curious how closely the model here correlates to the reality of the measures of concern and the rules that are supposed to deal with them.